Where the assessment was reopened after the expiry of four years from the end of the assessment year, HELD:(a) In view of the Proviso to s. 147, merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments but it must be specifically alleged by the AO in the recorded reasons that the escapement was on account of the failure of the assessee to make a full and true disclosure of material facts. In the absence of such allegation, the reopening is without jurisdiction;

Wel Intertrade followed. See Also: Hindustan Lever 268 ITR 332 (Bom)

(b) Rejecting the argument of the AO that the “actual reasons” were different from the communicated reasons, there is a strong logic and purpose behind the directions issued by the Supreme Court in GKN Driveshafts 259 ITR 19 that the AO is bound to furnish reasons and pass a speaking order to deal with the objections of the assessee and that is to prevent high-handedness on the part of AO and to temper any action contemplated under S. 147 of the said Act by reason and substance. This is not a mere ‘charade’ or a ‘pretence’ or ‘formality’. The argument rendered the entire process into a sham and made a mockery of the law.

(c) The requirement of recording the reasons, communicating the same to the assessee, enabling the assessee to file objections and the requirement of passing a speaking order are all designed to ensure that the Assessing Officer does not reopen assessments which have been finalized on his mere whim or fancy and that he does so only on the basis of lawful reasons. These steps are also designed to ensure complete transparency and adherence to the principles of natural justice. A deviation from these directions would entail the nullifying of the proceedings.

(d) The decision of the Supreme Court in Phool Chand Bajrang Lal 203 ITR 456 that the AO may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the truthfulness of those facts and that in such situation, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available, but, one of acting on fresh information DOES NOT APPLY as it was in the context of the old s. 147 prior to the amendment w.e.f 01.04.1989.

(e) Explanation I to Section 147 does not mean that production of account books and other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not “in any event” amount to disclosure within the meaning of the said proviso. The said explanation only stipulates that such evidence will not necessarily “amount to disclosure” within the meaning of the said proviso.

(f) As the facts showed that there were specific enquiries by the AO during the original assessment proceedings and due disclosure by the assessee, the reopening was not justified.